Starting an S Corporation
Are you considering starting an S Corporation? There are a few things you should know before you start. Likewise, your S Corp must meet specific requirements. These requirements are set by the IRS. Furthermore, some requirements may include:
- First, is a U.S. corporation.
- Second, not having more than 100 shareholders.
- Third, having only one class of stock.
At FinishLine Tax Solutions the nation’s top business services and tax relief firm, we have years of experience helping clients. Likewise, our team can help you with starting an S Corp. Furthermore, we can help you determine if an S corporation is right for you. Similarly, once you’re ready, we can help you set it up. Give us a call when you’re ready to get started.
How to Start an S Corp or S Corporation
There are some things to know about starting an S Corp. First, S Corporation investors must be:
- Specific trusts and estates.
- Certain tax-exempt organizations.
Similarly, the following do not qualify as S Corporation investors:
- Nonresident aliens
- Certain financial institutions
- Insurance companies
- Domestic international sales companies
How is S Corporation Taxed?
There is no federal income tax charge. In other words, the profit goes to the S-Corp’s shareholder. Subsequently, the shareholders are taxed. Furthermore, the following can be passed on to S Corp shareholders:
- Business income
Additionally, shareholders must report income and losses on individual tax returns. Likewise, shareholders must pay taxes at ordinary tax rates.
Advantages of Starting an S Corporation
There are some advantages that come with starting an S-Corp. In other words, an S Corp can help you create credibility with:
- Potential customers and clients
Starting an S Corp shows your commitment to your company. Additionally, an S Corporation does not pay federal taxes. In other words, you can save money on your federal taxes. Likewise, saving money is always helpful. Similarly, it’s especially helpful when you’re starting a business. Other benefits include:
- Limited liability protection. In other words, owners are not responsible for debts and liabilities.
- Easy transfer of ownership. In other words, you can pass ownership on.
- Unlimited life. In other words, if an owner dies, the company can stay.
- Credibility with clients, investors, and employees.
- Lower audit risk.
- Tax-deductible expenses.
- Self-employment tax savings.
Disadvantages of Starting an S-Corp
There are also some disadvantages to starting an S-Corp. First, the IRS can examine how S-Corporations are paying their employees. S-Corps can conceal salaries as corporate distributions to avoid paying payroll taxes. Starting an S-Corp can also take time and money. First, the corporation must obtain a registered agent for the business. Second, it also has to pay other fees for incorporating itself. Additionally, in some states, S-Corp owners will pay:
- Annual report fees
- Franchise tax
- Other miscellaneous fees
However, these fees are often low.
Who can be a shareholder in an S-Corp?
An S-Corp shareholder can be an employee. This setup is especially popular within the startup world. In other words, your shareholders can earn salaries. Additionally, shareholders can receive corporate dividends. These dividends are also tax-free. Other individuals who can be shareholders include certain trusts. Estates can also be S-Corp shareholders. Additionally, some tax-exempt corporations can also be shareholders. Finding out who can and can’t be an investor can be tough. The experts at FinishLine Tax Solutions can help. We know more about S-Corps than anyone. Call us today and get your business going tomorrow. As a business ourselves, we know how to do it right.
What is the difference between an S Corp and an LLC?
Starting an S-Corp is different from starting an LLC. With an S-Corp, owners pay themselves salaries. S-Corp owners also receive money from additional earnings. In contrast, an LLC is a “pass-through entity.” In other words, income and expenses are reported on personal income taxes. Likewise, it’s the business owner who has to file taxes. Deciding whether an S Corporation or LLC is right for you can be tough. The experts at FinishLine Tax Solutions can help you make the right decision. Call us today to get started. We’ll always work with your best interests in mind.
Interested in Starting an S Corp? Call FinishLine Tax Solutions
The professionals at FinishLine Tax Solutions have years of experience in various business services. We have helped clients with starting an S Corp. If you’re wondering if starting an S Corporation is the right move, call us today. Furthermore, we’ll be with you every step of the way. In other words, embarking on a new business journey is an exciting time. Likewise, let us help you do it right. Furthermore, call us today to get started in setting up your S Corp. Similarly, our team of experienced business consultants is ready for your call. Determining how to start your business can be a big decision. However, let us help you make it the right way. In other words, we will always have your best interests in mind.